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Politics : Formerly About Advanced Micro Devices

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To: Chung Lee who wrote (118608)	6/30/2000 10:08:19 PM
From: Maverick	Read Replies (2) of 1578965

HQ rates AMD Strong Buy,tgt $150 Date: 6/8/00 AMD: Company Signs 3 New Flash Contracts; Raising Our Rating to Strong Buy * While on our recent trip in Europe we picked up that the company has signed three new long-term flash contracts with Siemens, Nortel, and Philips. These contracts are similar in structure to the ones the company already has announced in 1Q:00 with Samsung, Cisco, and Alcatel. Our understanding is that these three new contracts totaling in excess of $1.5B in future flash sales over the next 3 years will not be officially announced by the company since the customers do not want their ability to procure parts from other flash vendors hindered in the future in case they need volumes over and above those stipulated and agreed to by AMD over the next three years per these contracts. * We estimate that about 70% of the company's current flash output already is spoken for via these long-term flash agreements. We expect this number to rise to about 90% moving forward. * As we have continued to highlight, more than 75% of the company's flash business is high density (>8 meg or higher) and this number will edge higher moving forward. The most superior way in our opinion to play the current booming flash upcycle is to buy the company's stock. There is no other company in our mind who is executing better in flash than AMD. * Overall, the company's current quarter thus far is tracking very well in terms of MPU and flash sales. On the whole we feel very comfortable with our expectations for the current quarter thus far. * There have been some rumors lately about the company's yields not being good at its Dresden fab and also some about issues with the new VIA KZ133 chipset. Our checks with our industry contacts and with the company indicate to us that MPU yields at both Dresden in Germany and Austin, TX are if anything ahead of expectations. The VIA chipset though on a steep ramp is also looking good in terms of yields. * The company we understand now will be paying taxes possibly as soon as the current quarter and also in the second half this year and guidance for that will be forthcoming during the 2Q:00 conference call. The prior guidance was for NOLs to extend through this year. Our $5.00 EPS number for this year stays currently untaxed. * Based on our current semiconductor thesis that we again highlighted in a separate note today morning - the fact that we are still early in the current cycle and the fact that we do not believe that the current tight supply vs demand dislocation is going to change at least through mid of next year - indicates to us that the company's stock will continue to set new highs moving forward. * We are raising AMD to a Strong Buy rating from Buy and reiterate our 12 month price target of $150 or 27 times our FY01 EPS estimate of $5.50. 1999 A 2000 E 2001 E Q1 EPS $(0.81) $1.15A $1.22 Q2 EPS (1.10) 1.15 1.26 Q3 EPS (0.72) 1.21 1.38 Q4 EPS 0.43 1.50 1.64 FY EPS (2.20) 5.00 5.50 FY REVS (M) 2,858 5,002 6,600 CY EPS (2.20) 5.00 5.50 CY P/E NM 17 16 FY Ends Dec Current Price $87.00 52-Week Range $16-97 Market Cap (M) $14,955 Shares Out (M) 171.9 Book Value $12.79 Cash/Share $5.35 P/S Ratio LTM 4.5 P/S Ratio FTM(E) 2.8

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